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Despite growing profits over a decade, an ophthalmic practice’s optical dispensary profits were not growing along the same curve. This case study highlights how an optical dispensary inventory management firm may be able to identify strategies to boost capture-rate underperformance.
Take-home message: Despite growing profits over a decade, an ophthalmic practice’s optical dispensary profits were not growing along the same curve. This case study highlights how an optical dispensary inventory management firm may be able to identify strategies to boost capture-rate underperformance.
In the decade that Lynne Luster has been practice manager at Microsurgical Eye Consultants, Peabody, MA, the group’s profits have grown each year under her watch.
The downside? The practice’s optical dispensary profits were not growing along the same curve as the overall practice-which meant a decreased rate of eyecare patients being converted into eyewear customers.
One factor in this decreased conversion rate, Luster suspected, could be inadequate optical dispensary inventory management. Specifically, she found that sales representatives and other vendors were bringing in frames in a disorganized, non-strategic fashion.
Luster saw the need to corral this, but the more-pressing duties of managing a growing eyecare practice did not afford the time needed to optimize optical dispensary profits. Doing so would have been, essentially, a second full-time job.
Over the decade of Luster’s tenure, the practice seemingly had outgrown one manager’s ability to oversee both practice and optical. She could do both, but couldn’t do both effectively enough to maximize overall profits.
It became obvious to Luster that the practice would be best served by engaging an optical dispensary management firm (Vision Associates Inc.).
“We saw outsourcing not only as a means to gain expertise in inventory control, but also to provide hands-on management that I was stretched too thin to effectively provide,” she said.
The firm’s customizable, often turnkey optical dispensary management and consulting services allow eyecare practices to maintain ownership and control of their dispensaries while relieving them of the time and effort involved in their everyday operation.
As inventory was Luster’s most worrisome issue, the focus began there. Systems designed to bring about meaningful change to the practice’s inventory purchasing and benchmarking structure were incorporated.
“Lens refractions and their subsequent frame sales capture rates determine a dispensary’s size, as well as its income potential,” said Mary Walker, director of operations, Vision Associates Inc. “Ophthalmologists should strive to achieve capture-rate benchmarks. When these numbers underperform, the inventory a dispensary is presenting to its customers can be a significant factor.”
Determining whether the appropriate types of frames-as well as an ideal number of frames-are on display necessitates a bird’s-eye view of the dispensary. A major factor could be a shortage of appropriate products for the particular patient base. From there, the calculations are math-meets-metadata.
In this case, the inventory actually was not the primary reason in capture-rate underperformance.
After a review of operations, it became evident that patients were leaving due to extended wait times. Updated software, combined with onsite visits from the firm, determined the need for expansion.
In a nutshell, the dispensary needed more places for patients to receive service. Among the action points:
· The resulting collaborative redesign added dispensing stations and, to service them, even upped staff.
· Mentorship and instillation of best practices were also incorporated to further streamline and enhance the dispensary.
· The initial problem of non-strategic frame buying was solved with an inventory customized to the patient base.
· The final touch was an enhanced internal marketing program.
The firm provided “our staff with enlightening education regarding the latest eyewear technology, and also incorporated incentives for opticians and sales staff alike,” Luster said.
“We no longer have stale inventory taking up precious space on our frames board,” said Luster, noting that the firm also helped set price point and discounting strategies that led to a significant increase on average sales.
In the first 6 months working with the optical dispensary management firm, the practice’s optical sales increased by 10%. By its third year, the practice realized a 15% increase in average sales-a figure that points to its improved inventory management. And so far in 2016, sales are up nearly 10% over this point last year.
The dispensary is now far more representative of a growing, thriving business, Luster noted.
“Our practice has 10 physicians servicing about 200 patients per day,” she said.
Under that level of business, when considering whether to partner with an optical dispensary management firm, Luster offered this advice: “Practice managers should ask themselves whether it’s feasible to give 100% to [the] ophthalmology practice while still optimizing an optical dispensary.”
Luster did not indicate any proprietary interest in the subject matter.